2025 Guide: New Car Loan vs. Used Car Loan Interest Rates in Canada

Searching for lower interest rates in auto loans? One of the most important factors determining the rate of interest in car loans is whether you want a new car loan or a used car loan. In this blog, we will discuss new car vs used car interest rates to help you make the best choice. Read more to find out:

When you are planning to finance a new car or an old car in Canada, you might face the age-old dilemma: which one is better, used vs new car loan rates? The average interest rates for used cars and new cars can highly impact the overall costs you will pay to the dealership by the end of your loan term. For car buyers in Canada, understanding new vs used car interest rates is vital to make a financially sound and smart decision.

This blog will help you understand how interest rates on new cars vs used differ, and which car loan British Columbia you should consider for yourself. By the end of this blog, you will be able to navigate this decision easily.

New Car vs Used Car Interest Rates: What’s the Difference?

When comparing new car loan vs used car loan rates, the biggest difference is usually the interest rate. You can get lower interest rates on new car loans compared to used car loans from used car dealers in Langley, BC. Here’s why:

New cars are seen as less risky by car dealerships. Since the vehicle has not gone through a lot of depreciation yet and also comes with a warranty, car dealerships are more confident in recovering their money.
Used cars come with more uncertainty. A lot of the car's value has already depreciated, and it has gone through a lot of wear and tear as well. This is why used car dealers in Surrey, BC, charge a higher interest rate on used car loans.

Average New and Used Car Loan Rates in Canada

While the exact rates vary in every car dealership and according to the borrower's profile, here’s a general idea of what rates you can expect when getting a loan to buy a used vehicle or a new vehicle in Canada:

As you can see, used car interest rates vs new car interest rates differ by 2% to 3%. The gap may change depending on your credit history and the rates offered by the car dealership.

Top Factors That Affect Auto Loan Interest Rates

Whether you’re buying a new or used car, the car loan rates british Columbia will depend on several factors:

1. Credit Score

Your credit score is one of the major factors that determine your car loan interest rate. If you have a high credit score (above 750), you are more likely to get the best deals on lower interest rates in car loans for both new and used cars.

2. Loan Term

Car dealerships charge higher interest rates for longer loan terms. For example, a 72-month loan will have a higher interest rate compared to a 36-month loan, even if the monthly payment is lower.

3. Vehicle Age

The older a used vehicle is, the higher the interest rate will be. A 10-year-old used car will have a higher interest rate than a 2-year-old used car.

4. Down Payment

A higher down payment can reduce the total amount financed and possibly lower your interest rate. This is especially helpful when financing a used car.

Is It Better to Buy a New Car or Buy a Used Car in Canada?

From total cost of ownership to depreciation of value, what other factors should you consider when you buy a used or new car in Canada? Let's find out:

Why You Might Choose a New Car

Lower interest rate
Comes with a full warranty
You get access to the latest features.
You can even qualify for 0% interest rate financing deals.
Longer lifespan and fewer repair costs.

Why You Might Choose a Used Car

Lower up-front cost
Slower depreciation
Lower insurance premiums
Better loan terms
The overall loan amount is less

Most importantly, you must note that when comparing used car interest rates vs new car interest rates, the average auto loan interest rates are higher for a used car unless you have excellent credit or put down a large deposit.

Should You Finance a New or Used Vehicle?

The answer depends on your current financial situation and personal goals in life. If you are actively trying to find a better interest rate on new or used car, then a new vehicle would be the right choice for you, especially if you qualify for 0% financing rates on auto loans. But if your priority is to find options with an overall low cost and you are okay with a slightly higher interest rate, then a used car loan might suit your budget more.

Always compare new and used car loan rates available at the dealership before finalizing your decision. You can also apply for a pre-approval to understand what interest rates you qualify for based on your credit history.

Tips for Getting the Best Car Loan Interest Rates in Canada

Check your credit score before applying for the car loan
Look up the average car loan interest rates for both used and new cars at the dealership.
Make a higher down payment if possible.
Keep your loan term short (48–60 months is ideal)
Look for certified pre-owned (CPO) vehicles because they usually provide better used car loan rates.

Final Thoughts

The decision between a new vs used car loan depends on your personal needs and financial situation. While new car loans can help you get lower interest rates, used cars can still be a more affordable choice despite higher interest rates. Before you buy a car, evaluate your budget, explore your financing options, and choose that fits your needs the most.

All Credit Scores Accepted!